On Our Minds: May PCE and Some Thoughts on Underlying Inflation Trends

May PCE data confirms persistent inflationary pressures with core PCE inflation firming and underlying trends reaccelerating to 3%. The Fed appears behind the curve, suggesting potential rate hikes are forthcoming.

Key Takeaways

• 1.Core PCE inflation is firm and the underlying inflation trend has been reaccelerating to approximately 3% since December 2025.
• 2.The Fed appears behind the curve, increasing the likelihood of rate hikes this year given signs of labor market reacceleration.
• 3.Standard trimmed mean inflation measures like the Dallas Fed PCE can be misleading due to distribution skewness, necessitating bias-adjusted analysis.

Table of Contents

• May PCE Release
• Measuring Underlying PCE Inflation Trends

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